Currency Movements and Financial Implications for Expats
Updated: Aug 11
This Week at a Glance
Sterling was the weakest major, as softer UK inflation and a cautious Bank of England widened the gap between UK and US interest rate expectations.
A hawkish first FOMC under new Federal Reserve Chair Kevin Warsh repriced US rate expectations, lifting Treasury yields and the US Dollar.
GBP/USD fell around 1.65% to a low of 1.3166, with GBP/EUR down about 0.50% and EUR/USD down about 1.25% on the week.
The week ahead is lighter: flash PMIs on Tuesday and the Federal Reserve's preferred inflation gauge, US Core PCE, on Thursday.
Market Overview
Sterling and UK Interest Rate Expectations (GBP)
Last week was dominated by a significant repricing of US interest rate expectations, triggering broad US Dollar strength and leaving Sterling as the weakest performer amongst the majors. GBP/USD (Cable) opened the week near 1.3450, which proved to be the weekly high, before falling sharply to a low of 1.3166 and closing the week down approximately 1.65%. GBP/EUR initially traded around 1.1590 before gradually weakening throughout the week, reaching a low of 1.1519 on Friday afternoon and closing at 1.1530, representing a decline of around 0.5%. EUR/USD also came under sustained pressure, falling from above 1.1600 at the start of the week to a low of 1.1421 before ending Friday at 1.1476, a weekly depreciation of approximately 1.25%.
Sterling's weakness began to emerge early in the week following softer UK inflation data and continued signs that the Bank of England remains cautious about the pace of future monetary tightening. While UK economic data was relatively limited, investors increasingly focused on the divergence developing between UK and US interest rate expectations. With inflation continuing to moderate and economic growth remaining subdued, markets reduced expectations for any materially higher UK interest rates over the coming quarters. This left Sterling particularly vulnerable once the focus shifted to the United States and the Federal Reserve's policy decision on Wednesday.
The Federal Reserve and a Stronger Dollar (USD)
The largest move of the week came following new Federal Reserve Chair Kevin Warsh's first FOMC meeting. The significance of the sharp GBP/USD sell-off was not simply that the US Dollar strengthened; rather, markets abruptly reassessed the entire narrative surrounding the new Fed leadership. Warsh had been widely viewed as President Trump's preferred choice because investors expected him to be more sympathetic to lower interest rates than his predecessor. Instead, his first meeting delivered a distinctly hawkish message.
The Federal Reserve held interest rates unchanged but removed its previous easing bias, raised inflation forecasts, and signalled that policymakers increasingly see upside inflation risks. Updated projections suggested that rates may need to rise rather than fall, whilst Warsh repeatedly stressed the importance of restoring price stability and avoided offering any indication of future rate cuts. Markets responded by sharply increasing expectations for higher US interest rates, pushing Treasury yields and the US Dollar significantly higher.
A key driver behind the move was the Federal Reserve's closely watched "dot plot," which provides guidance on where policymakers expect interest rates to be over the coming years. Last week's projections were notably more hawkish than markets had anticipated.
The median projection shifted higher, and a growing number of policymakers indicated that rates may need to rise rather than fall over the remainder of the year. This was especially significant given widespread expectations that Warsh would lean towards a more accommodative policy stance. Instead, investors were presented with a Federal Reserve that appears increasingly willing to maintain restrictive monetary policy for longer if inflation remains above target. The result was a sharp widening of expected US-UK yield differentials, one of the most important drivers of GBP/USD, which accelerated Sterling losses throughout the second half of the week.
What made the move particularly important was the credibility signal sent by the new Fed Chair. Had Warsh immediately pivoted towards lower rates, markets may have questioned the Federal Reserve's independence. Instead, his first meeting appeared designed to demonstrate the opposite: a willingness to prioritise inflation control regardless of political expectations. Investors interpreted this as increasing the likelihood of a "higher-for-longer" US interest rate environment, helping to fuel one of the strongest weekly US Dollar advances seen in recent months.
The Euro and the Dollar (EUR/USD)
The Euro also weakened against the US Dollar during the week, although losses were less severe than those suffered by Sterling. EUR/USD fell from above 1.1600 to a low of 1.1421 as the stronger US Dollar theme dominated trading. Whilst Eurozone economic fundamentals remained relatively stable, markets were forced to reassess relative interest rate expectations following the Federal Reserve's hawkish shift. With the European Central Bank already signalling a more cautious approach following recent policy adjustments, investors increasingly favoured US Dollar-denominated assets, leading to broad-based Euro selling.
Attention within the Eurozone remained focused on economic activity indicators and the outlook for growth across the bloc's largest economies. Whilst concerns over manufacturing weakness remain present, there were few developments capable of offsetting the impact of the Federal Reserve's policy shift. As a result, EUR/USD spent much of the latter part of the week tracking US yield movements rather than domestic Eurozone developments, leaving the single currency on the defensive into Friday's close.
UK Politics and Sterling
Away from central banks, UK political developments also attracted increasing attention. Andy Burnham's victory in the Makerfield by-election has intensified speculation surrounding Prime Minister Keir Starmer's leadership position. Reports over the weekend suggested growing pressure within the Labour Party following Burnham's strong performance, with increasing discussion around a potential leadership challenge. Market participants generally dislike political uncertainty, and whilst the immediate impact on Sterling was limited compared with the Federal Reserve-driven moves, investors will continue to monitor developments closely.
Speculation that Starmer may be considering his future, alongside reports that he spent the weekend at Chequers discussing next steps, has added another layer of uncertainty to the UK political backdrop at a time when Sterling is already facing pressure from shifting interest rate expectations.
The Week Ahead
Looking ahead to this week, the economic calendar is relatively light compared to normal, although several important releases could still generate volatility. Monday begins with comments from ECB President Christine Lagarde, which may provide further guidance on the ECB's policy outlook. Tuesday brings the key data event of the week, with Composite, Manufacturing, and Services PMI surveys released across Germany, the Eurozone, the UK, and the United States. These figures will provide an important snapshot of business activity and economic momentum heading into the second half of the year.
Attention will then turn to Thursday's US Core Personal Consumption Expenditure (PCE) inflation data, the Federal Reserve's preferred inflation measure. Following last week's hawkish Fed meeting, any upside surprise could reinforce expectations of higher US interest rates for longer and provide further support for the US Dollar. Conversely, softer inflation data could allow some of last week's aggressive USD gains to unwind. Overall, markets enter the week with the US Dollar firmly supported by shifting interest rate expectations, whilst Sterling and the Euro will need stronger domestic data to regain lost ground.
Where the majors finished last week (indicative, and will move through the week):
GBP/USD 1.3227, down approximately 1.65% on the week
GBP/EUR 1.1530, down approximately 0.50% on the week
EUR/USD 1.1476, down approximately 1.25% on the week
Key Economic Data This Week
The key data to look out for this week is as follows:
Monday 22nd June
EU ECB's Escriva Speech
EU ECB's President Lagarde Speech
US Fed's Waller Speech
EU Consumer Confidence (JUN)
Tuesday 23rd June
GER HCOB Composite PMI (JUN)
GER HCOB Manufacturing PMI (JUN)
GER HCOB Services PMI (JUN)
EU ECB's Escriva Speech
EU HCOB Composite PMI (JUN)
EU HCOB Manufacturing PMI (JUN)
EU HCOB Services PMI (JUN)
EU ECB's Lane Speech
UK S&P Global Composite PMI (JUN)
UK S&P Global Manufacturing PMI (JUN)
UK S&P Global Services PMI (JUN)
US ADP Employment Change 4-week average
EU ECB's Elderson Speech
US S&P Global Composite PMI (JUN)
US S&P Global Manufacturing PMI (JUN)
US S&P Global Services PMI (JUN)
EU ECB's Vujcic Speech
UK BoE's Taylor Speech
UK BoE's Dhingra Speech
US API Weekly Statistical Bulletin
Wednesday 24th June
GER IFO Business Climate (JUN)
GER IFO Current Assessment (JUN)
GER IFO Expectations (JUN)
EU ECB's Nagel Speech
UK BoE's Breeden Speech
EU ECB's Cipollone Speech
US New Home Sales Change (MoM)(MAY)
UK BoE's Dhingra Speech
Thursday 25th June
GER GfK Consumer Confidence Survey (JUL)
EU Economic Bulletin
EU ECB's Lane Speech
EU ECB's Cipollone Speech
US Core Personal Consumption Expenditures - Price Index (MoM) & (YoY)(MAY)
US Core Personal Consumption Expenditures (QoQ)(Q1)
US Durable Goods Orders (MAY)
US Durable Goods Orders ex Defense (MAY)
US Durable Goods Orders ex Transportation (MAY)
US Gross Domestic Product Annualized (Q1)
US Gross Domestic Product Price Index (Q1)
US Initial Jobless Claims
US Nondefense Capital Goods Orders ex Aircraft (MAY)
US Personal Consumption Expenditures - Price Index (MoM) & (YoY)(MAY)
US Personal Consumption Expenditures Prices (QoQ)(Q1)
US Personal Income (MoM)(MAY)
US Personal Spending (MAY)
US Fed's Williams Speech
US Fed's Goolsbee Speech
Friday 26th June
EU ECB's Nagel Speech
US Michigan Consumer Expectations Index (JUN)
US Michigan Consumer Sentiment Index (JUN)
US UoM 1-year & 5-year Consumer Inflation Expectations (JUN)
US Fed's Williams Speech
EU ECB's Vujcic Speech
What This Means for Globally Mobile Families
For globally mobile families, currency is rarely just a number on a screen. The level of GBP/EUR or GBP/USD shapes the real value of a pension paid in one currency and spent in another, the cost of a home abroad, school fees, and how far retirement income stretches. A week in which a new Federal Reserve Chair's first decision reset US rate expectations is exactly the kind of week that can move those numbers.
Here is how Paratus Wealth can help. The themes in this week's briefing connect directly to the planning questions we hear, and to the services we provide:
Moving Money Across Borders. When the Dollar moves as sharply as it did this week, timing and structure matter. Our currency exchange service with Agility Forex is built for exactly these transfers, and it is often the simplest place to start a wider conversation.
Pensions Held in One Currency, Life Lived in Another. Currency and interest rate moves sit underneath almost every cross-border retirement plan. Our retirement planning service, with options such as a SIPP, a QROPS, and a pension review, looks at how that risk fits your wider picture.
Investing Through Volatility. A repricing of interest rate expectations is exactly when portfolio structure matters. Our savings and investment approach is built around long horizons rather than single weeks.
Protecting the Plan and the People in It. Income, health, and life protection, including life insurance, helps keep a plan intact when markets and circumstances move.
The Wider Cross-Border Picture. Cashflow modelling shows how rate and currency moves could play out over time, and UK inheritance tax planning addresses the estate questions that often sit alongside them for globally mobile families.
Paratus Wealth helps expatriates plan around exactly this kind of cross-border complexity, from currency and cost-of-living planning to pensions, investments, protection, and estate planning, so that short-term market moves are met with a long-term plan rather than a reaction. None of the above is financial advice. It is general information to help you frame the right questions. If any of it is part of your situation, you are welcome to speak with Paratus.
Related Reading
Market News written by Ben Davies (Head of Dealing UK), Agility Forex. Shared by Paratus Wealth with permission. The commentary above is general market information provided by Agility Forex and is reproduced verbatim. It is for information only, does not constitute financial, investment, or currency advice, and should not be relied upon as such. Paratus Wealth does not provide services to, and does not market to, residents of the United Kingdom.
Any UK references in this commentary relate to cross-border exposure for people living outside the UK. Currency and investment values can fall as well as rise. This page is also subject to the full Paratus Wealth regulatory disclaimer shown in the site footer. For guidance specific to your circumstances, contact our team.
Comments